Investor protection and the value effects of bank merger announcements in Europe and the US

Hagendorff, Jens ORCID: https://orcid.org/0000-0002-3567-7826, Collins, Michael and Keasey, Kevin 2008. Investor protection and the value effects of bank merger announcements in Europe and the US. Journal of Banking & Finance 32 (7) , pp. 1333-1348. 10.1016/j.jbankfin.2007.11.008

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Abstract

Investor protection regimes have been shown to partly explain why the same type of corporate event may attract different investor reactions across countries. We compare the value effects of large bank merger announcements in Europe and the US and find an inverse relationship between the level of investor protection prevalent in the target country and abnormal returns that bidders realize during the announcement period. Accordingly, bidding banks realize higher returns when targeting low protection economies (most European economies) than bidders targeting institutions which operate under a high investor protection regime (the US). We argue that bidding bank shareholders need to be compensated for an increased risk of expropriation by insiders which they face in a low protection environment where takeover markets are illiquid and there are high private benefits of control.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HG Finance
Publisher:	Elsevier
ISSN:	0378-4266
Date of First Compliant Deposit:	30 March 2016
Last Modified:	27 Nov 2024 11:00
URI:	https://orca.cardiff.ac.uk/id/eprint/76287

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